Sponsor

Sponsor

Job losses slow to 247K; jobless rate dips to 9.4 percent

Employers throttled back on layoffs in July,
cutting just 247,000 jobs, the fewest in a year, and the
unemployment rate dipped to 9.4 percent, its first decline in 15
months.

It was a better-than-expected showing that offered a strong
signal that the recession is finally ending.

The new snapshot, released by the Labor Department on Friday,
also offered other encouraging news: workers' hours nudged up after
sinking to a record low in June, and paychecks grew after having
fallen or flat lined in some cases.

To be sure, the report still indicates that the jobs market is
on shaky ground. But the new figures were better than many analysts
were expecting and offered welcomed improvements to a part of the
economy that has been clobbered by the recession.

Analysts were forecasting job losses to slow to around 320,000
and the unemployment rate to tick up to 9.6 percent.

"There's clearly been a turn for the better. The worst is
behind us in terms of layoffs. Now we need to see more hiring," said economist Ken Mayland, president of ClearView Economics.

The dip in the unemployment rate - from June's 9.5 percent - was
the first since April 2008. One of the reasons the rate went down,
however, was because hundreds of thousands of people left the labor
force. Fewer people, though, did report being unemployed.

All told, there were 14.5 million out of work in July.

If laid-off workers who have given up looking for new jobs or
have settled for part-time work are included the unemployment rate
would have been 16.3 percent in July. That's down from 16.5 percent
in June, which was the highest on records dating to 1994.

Also heartening: job losses in May and June turned out to be
less than previously reported. Employers sliced 303,000 positions
in May, versus 322,000 previously logged. And, they cut 443,000 in
June, compared with an earlier estimate of 467,000.

The job cuts made in July were the fewest since August 2008.

The slowdown in layoffs in part reflected fewer jobs cuts in
manufacturing, construction, professional and business services and
financial activities - areas that have been hard hit by the
collapse of the housing market and the financial crisis. There also
were fewer layoffs in the temporary-help industry, which analysts
watch for clues about future hiring. Retailers, however, cut more
jobs in July.

Those losses were blunted by job gains in government, education
and health services, and in leisure and hospitality.

The worst of the job cuts have passed.

The deepest job cuts of the recession came in January, when
741,000 job disappeared, the most in any month since 1949.

Since the recession began in December 2007, the economy has lost
a net total of 6.7 million jobs.

Slower job losses are occurring because companies aren't cutting
investment and spending as drastically as they had been during the
depths of the recession which came in the final quarter of last
year and carried over into the first quarter of this year.

With companies feeling a bit better about the economy's
prospects and their own, they boosted workers' hours in July. The
average work week rose to 33.1 hours, after having fallen to 33
hours in June, the lowest on records dating to 1964.

And, employers bumped up wages.

Average hourly earnings rose to $18.56 in July, up from $18.53
in June. Hourly earnings were stagnant in June. Average weekly
earnings, which fell in June, rose to $614.34. Those gains raised
hopes that consumers - whose spending accounts for the
single-largest slice of economic activity - will feel more
confident and more inclined to spend in the months ahead, thus
helping the recovery.

Other recent barometers have shown some improvements in
manufacturing, housing and construction activity.

The government reported last week that the economy shrank at a
pace of just 1 percent from April-to-June, another sign the
recession is winding down.

Many analysts predict the economy could start growing again in
the current July-to-September quarter. And, the Fed recently
observed that the economy is finally showing signs of stabilizing
in some regions of the country - especially in parts of the
Northeast and Midwest - bolstering hopes of a broader-based
recovery this year.

Even with the improvements, it will take time for the jobs
market to fully heal.

The Federal Reserve has predicted the unemployment rate is
likely to top 10 percent this year. Some Fed officials think it
could rise as high as 10.6 percent in 2010. The post-World War II
high was 10.8 percent at the end of 1982, when the country suffered
through a severe recession.

An elevated unemployment rate could become a political liability
for President Barack Obama when congressional elections are held
next year. The last time the unemployment rate topped 10 percent,
the party of the president - then Ronald Reagan's GOP - lost 26
House seats in the midterm elections in 1982.

Obama has urged Americans to be patient and give time for his
$787 billion stimulus package of tax cuts and increased government
spending to take hold. Most of the money will flow in 2010.

When the economy is healthy, employers add a net total of around
125,000 jobs a month just to keep the unemployment rate stable. To
get the jobless rate down to a more normal 5 percent range, it
would take stronger job growth - of at least 200,000 jobs a month.
Economists say it might take until 2013 to drive down the
unemployment rate to 5 percent.